Inflation retreat will bring some comfort to small business

Inflation retreat will bring some comfort to small business

by | Jun 28, 2023 | Media Release, News

Fresh inflation numbers released today will offer some consolation to Australia’s 2.4 million small business owners, many of whom are nearing breaking point as price pressures and elevated interest rates increase the risk of further economic pain.

“After experiencing 12 interest rate increases, declining consumer spending, and a surge in input costs, it’s good news for small businesses that inflation is returning to its downward trend,” ACCI chief of policy and advocacy David Alexander said.

“As supply chain bottlenecks ease, small businesses have experienced a decline in petrol prices while material costs have also steadily decreased from previously high levels.

“Despite this welcome progress, the expected inflation-chasing wages hike from July 1 will heap even more pressure on small businesses when they can least afford it.

“Many small businesses are seeing their costs rise to the point where they have no choice but to increase their prices to maintain operations.

“With further disruption on the horizon as the federal government pursues retrograde changes to the industrial relations system, small businesses across the country are questioning why laws that will make it harder to create new jobs and grow the economy are needed.

“At its meeting next week, the Reserve Bank should take stock of whether rates are sufficiently restrictive to bring inflation back to target.

Manufacturing outlook sours as cost crisis continues

by | Jun 27, 2023 | Media Release, News

Industry sentiment is darkening as local manufacturing stalls amid a broader economic slowdown and an ongoing cost crisis, the latest ACCI-Westpac Industrial Trends Survey has found.

Westpac chief economist Bill Evans said that the manufacturing sector is experiencing a damaging slowdown in activity. This is being compounded by elevated costs and persistent headwinds from the availability of labour and materials.

Margins are being squeezed with only a partial pass-through of spiralling input costs to manufacturers’ prices. Despite the highest proportion of firms since 1988 lifting their prices to protect margins, selling price increases continue to trail the surge in average costs.

“The Westpac-ACCI Actual Composite weakened in the latest survey, down from 53.9 in March to 50.7 in June.

“A reading around the break-even mark of 50 indicates that conditions within the manufacturing sector are stalling. The survey reported broadly flat new orders and employment, a decline in overtime and a slowing in output growth.

“The fading of earlier tailwinds and rising interest rates are contributing to a downbeat outlook for demand, while labour shortages and cost pressures persist.”

“The Expected Composite rose slightly to 52.6 in June, but follows 51.2 in March, which was the softest reading since 2014, outside of the pandemic-era lows during 2020.

“Notably, the general business mood has become extremely pessimistic with a net 32 per cent of respondents now expecting the business situation to worsen over the next six months. That eclipses the lows seen during the pandemic and is the weakest reading since the Global Financial Crisis.

“Businesses report that the economic outlook remains bleak, as interest rates continue to rise; high inflation reduces real household incomes and margins are squeezed. Conditions in the manufacturing sector are likely to deteriorate further over the period ahead.

“The bounce in new orders in March proved to be temporary, with a net 1 per cent of respondents reporting a decline in June, as demand stalls. Expectations remain subdued, with only a net 7 per cent of respondents anticipating a rise next quarter, down from an average of 34 per cent over 2021 and 2022.

“The survey reports there has been barely any let-up in the cost crisis facing manufacturers. This extended period of elevated costs, associated with labour and material shortages, and surging energy costs, must be threatening the viability of some businesses.

“Labour shortages remain intense but have eased somewhat over recent quarters. A net 50.8 per cent of respondents indicated that labour was “harder to find”, still very elevated but down from the series high of 65.8 per cent last September.

“Despite the bleak assessment, manufacturers remain intent on lifting investment. A net 29 per cent plan to increase spending on equipment. That is broadly in line with the highs seen when Australia was first emerging from COVID lockdowns. While this promises to address some of the pressures around capacity and rising labour costs, plans may go on hold if conditions deteriorate further.

ACCI chief of policy and advocacy, David Alexander, cautioned that manufacturers’ viability would be tested in the coming months as significant headwinds constrained profitability.

“The survey makes clear that there is little respite for local industry as profit margins continue to be squeezed tighter and tighter,” Mr Alexander said.

“Manufacturers are by no means immune from the cost pressures that are also battering Australian households – two thirds of firms experienced increasing material costs in the last quarter. At the same time almost 50 per cent of firms expect their wages bill to rise by the end of 2023.

“Profit expectations have plummeted to pessimistic levels, weaker reads in the past only observed during major economic disruptions such as the COVID pandemic, the GFC, and the recession of the early-90s.”

“The pressure on profit margins persists as businesses are unable to pass through costs to higher prices. While some firms have raised prices to maintain their profitability, these increases lag well behind the rise in input costs.

“Encouragingly, investment intentions have defied deteriorating conditions. However, with the government’s temporary full expensing measure set to end and the possibility of further interest rate rises on the horizon, firms’ investment plans may be disrupted,” Mr Alexander noted.

Read the full report here. 

The ACCI-Westpac Survey of Industrial Trends, Australia’s longest running business survey, dating from 1966, provides a timely update on manufacturing and insights into economy-wide trends.

Vale Simon Crean

by | Jun 26, 2023 | Media Release, News

The Australian Chamber of Commerce and Industry pays tribute to former Australian Labor Party leader and Australian Council of Trade Unions president Simon Crean, who passed away suddenly in Berlin overnight. 

“As leader of the ALP, president of the ACTU, federal minister and trade advocate, Simon Crean was universally respected and above all else, a thoroughly decent person,” ACCI chief executive Andrew McKellar said.

“Simon Crean made significant contributions in both politics and policy development, taking his most prominent role in driving consensus between government and the union movement in the establishment of the Prices and Incomes Accord in 1983.

“As minister, he dedicated himself to various crucial portfolios, from education to employment, all of which played a pivotal role in shaping the economy we have today.

“In more recent years, Simon transcended politics and continued to play a highly valuable role in promoting the benefits of free trade through his leadership of the Europe Australian Business Council and the Australia-Korea Business Council.

“His legacy will be remembered by his remarkable efforts to build consensus between unions and business. ACCI extends its deepest condolences to Simon Crean’s family and friends during this challenging time.

More effort needed to kickstart productivity growth: ACCI

by | Jun 7, 2023 | Media Release, News

Today’s National Accounts data has revealed that the Australian economy risks being dragged down by lacklustre productivity growth, the nation’s largest business network has warned.

Sluggish GDP numbers show that the economy expanded by just 0.2 per cent in the March quarter.

“These are worrying figures when we have a terms of trade boom – our economic situation really should be steady solid growth, but instead we have anaemic growth and in fact going backwards on a per capita basis,” ACCI chief of policy and advocacy David Alexander said.

“One of the key data points of concern is the further slowdown in productivity, which must become a key focus for government policymakers.

“The slide in labour productivity has continued with GDP per hour worked falling a further 0.3 per cent in the March quarter, with an overall decline of 4.6 per cent recorded for the year.

“At the same time, compensation of employees is up 10.8 per cent in the last 12 months, a rate that cannot possibly be sustained without a corresponding increase in labour productivity.

“The Reserve Bank has pointed out that without productivity increases, wage increases feed higher inflation, which then forces them to raise interest rates.

“The Productivity Commission has pointed to the centrality of flexibility as a key part of productivity, but worryingly we see the government making the system more inflexible through multi-employer bargaining and “Same Job, Same Pay” changes.

“Business urges the government to rethink its centralising approach to workplace arrangements and allow the more flexible, dynamic approach necessary for a modern economy.”

Rate rise brought to you by the ACTU

by | Jun 6, 2023 | Media Release, News

Last week’s decision to increase award wages by 5.75 per cent has forced the hand of the Reserve Bank, with the board delivering a further 0.25 per cent increase in the cash rate today.

“If last week’s wage increase was brought to you by the ACTU, so too is today’s rate rise,” ACCI chief executive Andrew McKellar said.

“The result of the ACTU’s irresponsible wages claim could not be clearer – wages growth not supported by productivity gains risks entrenching inflationary expectations and inflationary pressures.

“The Reserve Bank’s decision to hike rates another 0.25 per cent will come as a blow to millions of households and small businesses across the country.

“After last week’s Fair Work Commission decision, it has become increasingly difficult for the RBA to return inflation to target, with the bank indicating that further monetary tightening is likely.

“As the Reserve Bank has acknowledged in its statement today, unit labour costs are rising briskly, while productivity growth remains anaemic.  However, as Governor Lowe warned last week, the recent pickup in wages growth without corresponding increases in productivity cannot be sustained.

“Despite the Fair Work Commission’s attempts to downplay the implications of its award wages decision on inflation, the risks of broader benchmarking in other wage agreements through the rest of the labour force must be recognised.

“This failure to exercise responsibility risks consigning Australia to more economic pain – higher prices, mounting interest rates and fewer jobs.

Business unites to oppose destructive IR changes

Business unites to oppose destructive IR changes

by | Jun 5, 2023 | Media Release, News

The Australian business community today stands as one with the launch of a national media campaign to raise public awareness of the risks if the Albanese Government implements the so-called ‘Same Job, Same Pay’ industrial relations changes.

The latest upheaval to Australia’s workplace relations regime will lead to lower wage growth and fewer jobs – compounding the plight of workers and families who are already doing it tough.

The so-called ‘Same Job, Same Pay’ proposals does not mean equal pay for men and women.

It does not speak of fairness and justice, as its name falsely represents.

It means by law, employers will have to pay workers with little knowledge or experience exactly the same as workers with decades of knowledge and experience.

It means by law, you cannot earn better pay by working harder or longer, if your colleague does not share your ambition or work ethic.

This retrograde policy will deny Australian workers flexibility and the capacity to be treated individually. It will deny them the opportunity to negotiate more pay for harder work.

‘Same job, same pay’ will take away worker incentive and reduce productivity. This is not fair for workers or their employers. There is a better way, for better pay.

These changes will make it more difficult for small operators to do business with big companies – rendering many service providers simply unviable – while putting significant constraints on companies wishing to expand, construct new projects and infrastructure, or simply manage their operations in their own way.

Businesses of all shapes and sizes need the ability to ramp up and ramp down, as economic conditions require and as opportunities arise. 

Workplace rigidity will ensure these opportunities for growth will either go begging, or companies will be forced to endure a never-ending rollercoaster of hiring and firing as project development, construction and commodity prices rise or fall.

The Albanese Government must put the interests of the community and the broader economy ahead of this overt pursuit of giving more power to unions; a quid pro quo for years of generous support from the movement.

Andrew McKellar, chief executive Australian Chamber of Commerce and Industry: 

“Same Job, Same Pay is a misnomer. It’s the opposite of fair by restricting reward for effort and experience. It will take away the flexibility that workers want and businesses need.

“Claims that labour hire workers across the economy are paid less than employees are patently false. On average, labour hire employees are earning more than their permanent counterparts.

“Eliminating flexibility will weaken the economy, punish workers and drive up costs for consumers.”

Samantha McCulloch, chief executive Australian Petroleum Production and Exploration Association:

“The Australian oil and gas industry promotes fair and equitable pay and working conditions that reward effort and experience across the diverse career opportunities available in the sector.

“The industry is working tirelessly to provide Australian households and industry with reliable, essential energy but needs an industrial relations framework that supports operational flexibility and improved productivity to ensure competitive and affordable gas supply that is needed for Australia’s cleaner energy future.”

Jennifer Westacott, chief executive Business Council of Australia:

“People should be rewarded for their experience and effort, but those laws are going to make it impossible. 

“This is going to really impact on workers who are struggling with cost-of-living pressures and will also make Australia an extremely unattractive destination for people to invest – that means less jobs.

“It will be an own goal for the country and then an own goal for workers because jobs will go somewhere else.”

Matthew Addison, chair Council of Small Business Organisations Australia:

“Small Business seek to reward workers for effort, experience, loyalty and productivity.  We are very concerned that the “Same Job Same Pay” proposal will damage many employer-employee productive relationships.  We seek for Same Job Same Pay to address an identified problem and not have far reaching unintended negative consequences”

Shaun Schmitke, acting-chief executive Master Builders Australia:

“The use of independent and subcontracting within building and construction is a long-standing and legitimate method of engagement because of the phased way in which all building work is performed. 

“As catchy slogans mask the true consequences, the proposed industrial relations changes threaten to strip subbies and independent contractors of their autonomy to be their own boss, negotiate higher wages and conditions, and exercise the right to choose the projects they work on, free from the influence of unions.

“The proposed changes pose a serious threat, introducing uncertainty, commercial risk, and negative consequences for the community, consumers, and an industry already grappling with disruptions, economic uncertainty, and high inflation.

“The policy is not about closing a ‘loophole’ rather it ties the hands of the building and construction industry at a time when communities are crying out for more housing and projects to be delivered.”

Tania Constable, chief executive Minerals Council of Australia:

“How is it fair that someone with six-months’ experience can demand the same pay as someone with six-years’ experience? 

“Our workplaces should be about fairness, reward for effort, and experience. Not a blanket approach that fails to understand that all workplaces are unique and worker ambition and values, varied. Employees should expect to be paid on their experience, skills and qualifications. 

“This dangerous ‘policy is just the latest on a long series of attacks on Australian businesses that have cumulative effect of chasing away investment and jobs, hampering our economic recovery from COVID, and undermining Australia’s role in, and beneficiary of, a once in a multi generation clean energy boom.”

Tony Mahar, chief executive National Farmers Federation:

“Same Job, Same Pay’ would be a red tape minefield for farmers. Most farms are small, family-run businesses which don’t have lawyers or an HR department to turn to.

“It would spell chaos and confusion at peak periods like harvest where contractor numbers on farms can surge 500 per cent for just a few weeks.

“This isn’t about fairness. We can’t pretend every temporary contractor has the same value as a longstanding employee. We should be allowed to reward loyalty and experience.

“At the end of the day, making it more complex and costly to grow food will only make life more expensive for everyday Australians.”

Charles Cameron, chief executive Recruitment, Consulting and Staffing Association

“These changes will slow Australia’s speed to market.  Instead, there will be days of complex audits to determine what the same job is and whether there is even such a thing as a same pay level for that job.

“This law will make Australia stand out for regulatory over-kill and restricted speed to market.  I’m not sure that is the investment brand we are looking for in Australia.”